CIODecision-MakingLeadership/Innovation

6 Budgeting Strategies for Your Digital Transformation

IT budgets reflect how business owners perceive technology—a field that can transform the current business or just a framework that requires maintenance. It conveys whether the leaders want their IT department to try out new technologies along with regular work. In this article at CIO, Mary K. Pratt discusses the six IT budgeting strategies ideal for digital transformation.

Linking Budget to Innovation

An organization’s budget provides insight into the areas where leaders see benefits and would spend money based on priorities and goals, as per Larry Wolff, President and COO of Ouellette & Associates Consulting in Bedford, N.H. However, he opines that IT budget drives innovation, if used wisely.

Compare with Industry Trends

Kevin Sauer, CIO of Preferred Homecare, discusses with his business partners for goal-setting and new initiatives. At first, he prioritizes the necessary and then compares the IT budget with what the industry leaders are doing currently—how efficiently they are utilizing the IT budget based their company size, industry, etc.

Streamlining IT Under Capex

Previously, organizations invested heavily on IT infrastructure. CIOs could easily allocate IT under operating budget. With IT taking the centerstage now, Wolff suggests that you put the IT expenditure under capex. This gives a longer period for benefit realization, an option that stakeholders also feel safe about. If needed, CIOs must consult financial advisors to understand the accounting nuances.

Allocate IT Budget to Business Units

As per International Data Corp.’s 2017 “Worldwide Semiannual IT Spending Guide: Line of Business,” business units are spending more on IT. Eskander Yavar, a leader at BDO USA, suggests that you should encourage this so that the units also feel a sense of ownership to drive innovation and adjust their interim projects to capitalize on the money spent.

Research Deeply to Identify Moneymakers

CIOs should prioritize funding based on high-value areas. Andy Roswell-Jones, Vice President at Gartner, suggests that you should look out for high-potential areas instead of spending it all on regular items. You must do a thorough research to find out the high-ROI zones and allocate minimum to the rest to keep the lights on.

Think About the Future

CIOS must think ahead, so have a clear vision of the future and allot the IT budget on a yearly basis. Though you might be pressured to keep funds for the present, Roswell-Jones believes you should be assertive about deploying more funds to research and development.

Maintain or Modernize Legacy Systems

Majority of organizations spend more money on legacy systems than innovation. Though it would be expensive to modernize all your systems, you should know when to update or replace them. Rudy Puryear, leader at Bain & Co., narrates how successful CIOs utilize the saved budget from modernization and invest in other projects. This way the CEOs and board members understand how they are saving by spending optimally for legacy systems.

To view the original article in full, visit the following link: https://www.cio.com/article/3262224/budget/6-expert-budgeting-tips-for-it-leaders.html

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